Ban It, Bill It

India has outlawed online money gaming, yet almost simultaneously, it has decided to tax it at 40%, the same rate as casinos, horse racing, and lotteries. The contradiction is glaring with prohibition preached in principle yet profit pursued in practice. It captures the awkward fusion of morality and fiscal hunger that runs through much of India’s economic policy.

The government’s case is straightforward, as under Indian tax law, legality does not determine liability. Income from smuggling or bribery is still taxable. Goods and services, whether lawful or not, can attract GST. That logic, applied here, explains why online gaming can be banned one week and taxed the next. Yet the implications stretch further than the balance sheet.

One paradox is about intent.

By taxing online money gaming, the state signals that it wants not merely to suppress it, but also to monitor it. An outlawed industry that still generates invoices becomes a useful data trail. This dual regime—prohibit the activity, yet still invoice it—could easily become a template for other sectors where regulators worry about social or financial harm. Crypto exchanges are throttled by restrictions, yet trades are taxed. Shadow credit is formally barred, yet platform fees are collected. Fantasy sports and influencer pools may be next in line. Taxation becomes an instrument not just of revenue but of surveillance.

Another paradox concerns fairness.

The GST Council has put online gaming in the same basket as legal activities such as betting, lotteries and casinos, and its own FAQs confirm that all such “actionable claims” are now subject to the higher 40% rate. Only one of these is actually prohibited. To tax them alike is to undermine the distinction between compliance and defiance. Lawful businesses, licensed and regulated, are bracketed with criminalised ones. Meanwhile, the prohibited activity acquires a patina of legitimacy, for what the taxman invoices cannot be wholly beyond the pale.

There is also a deeper dissonance between morality and revenue as the government justified its ban on grounds of social harm and risks to financial integrity. If the harm is grave enough to warrant prohibition, then consistency demands that revenue be sacrificed. To collect tax while criminalising behaviour suggests that revenue matters more than principle. Patriotism, in this case, cuts both ways as citizens are warned of harmful pursuits even as the exchequer pockets the proceeds.

Policy Contradictions
This is not the first time India has blurred the line. Fuel is heavily taxed even as the state subsidises electric mobility. Tobacco and alcohol are vilified yet remain pillars of excise revenue. The online gaming paradox is starker only because the ban is total. The analogy from finance is telling as health insurers charge higher premiums to smokers while fund managers quietly invest in tobacco companies. Society pays, finance collects.

The risk of such inconsistency is not abstract, as it distorts incentives. Legal operators feel penalised for compliance. Illegal operators sense a mixed signal when the government is willing to tax them, perhaps even suggesting they are not beyond redemption. Tax officials are saddled with responsibilities better left to police and regulators. For a government that has spent years promising clarity in indirect taxation, this is a poor precedent.

There are better choices. If the objective is truly prohibition, then taxation should not be used as a proxy for regulation. Enforcement belongs with law enforcement, not the GST network. If instead the state means to regulate rather than outlaw, then it should say so openly by permitting, licensing, taxing, and supervising. What is incoherent is to proclaim a ban while laying a collection plate.

The treatment of online money gaming hints at how India may deal with the next wave of contested industries. Cryptocurrency, shadow lending, and other frontier markets sit in the same grey zone between innovation and harm. To outlaw while invoicing is tempting; it brings revenue without resolving the underlying question. Yet over time, that strategy hollows out both credibility and policy coherence.

Tax systems work best when they are anchored in fairness, neutrality, and transparency. Blurring the line between prohibition and monetisation undermines all three. India can either enforce its ban and forgo revenue, or acknowledge the industry and tax it like others. What it cannot do is both at once.

The paradox of outlawing the activity while invoicing the invoice is more than a quirk of fiscal policy. It is a test of whether India can align its moral stance with its fiscal choices. To fail that test is to admit that revenue, not principle, is the true game.